7 Responses to “DuMont for sale: $170 million”

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  1. Anonymous

    The lender and/or developer would have done better to simply rent these units out rather than face a huge delay in selling this building and taking a huge haircut on it. The banks and developer should be ashamed of themselves. This isn’t a vacant subdevelopment in Prince William County- it would be easy to fill these units and take a much smaller haircut.

  2. Anonymous

    Anon- that might be true, but they may not have access to funds to operate the building until such time that it generates sufficient cash flow to cover costs. They probably ran the numbers and figured that they would realize lower losses by selling now.

  3. Anonymous

    Once an owner rents a unit, the opportunity to sell the project is affected by the timetables of then having to comply with tenants’ rights laws and tenants’ first opporunity to buy the project. Selling a bulding vacant, consequently, is much more attractive to the investing public which, presumably will have made the decision to either operate as a rental or for-sale product at the re-priced basis. This strategy will gather the highest price for the project, for prospective purchasers will not have to discount their offers to buy, subject to the tenants’ rights and the passage of time (or other consideration) inherent in the process.

    This is one of the unintended consequences of the rent control laws. Transactions are frustrated, tax revenues are not realized from sale of the asset and from taxpaying residents that might have otherwised moved here rather than the subdivision in Prince William.

  4. pqresident

    let’s do a little math.

    559 units x $2495 claimed average pro forma rent = $1.395M per month in rent

    $1.395M monthly rent x 12 months = $16.74M yearly rent

    $16.74M yearly revenue/$170M sales price = 9.8% cap rate

    this is a very simple capitalization rate calculation and doesn’t take into account depreciation, running costs, interest costs, subsidies to get renters in the building etc. but a 9.8% cap rate is a very, very good starting number. it will be up to the future bidder/purchaser to figure out what the numbers would turn into versus what is stated in the investment summary. if I were in the RE business and had access to $170M in financing, I’d certainly give it a closer look.

    559 units x 1.5 people average per unit? that’s about 1670 less eyes on the street and 835 less tax paying patrons in the area. seems like the DC govt. would be motivated to get this deal moved along too.

  5. Anonymous

    uhh…you forgot the opex ratio.

    Take something on the low end…say 30%. Now your $16.74M yearly revenue drops to $11.72MM annual net income – which is what you should be capping.

    Now your attractive 9.8% cap drops to a sub 7.

    …now continue

  6. pqresident

    true, the opex does need to be accounted for but wasn’t forgotten. that’s what I meant by “running costs” in my comment above. it’s also mostly a variable cost so it falls upon the purchaser/operator to figure out what efficiencies they think they can accomplish.

    the sub-7 might be pushed up a bit with a discount in the sales price…:)

  7. kat

    This article from the Post might shed some light on the decision to sell.